Officials at the Bank of England have raised concerns about the relaxation of lending rules in the commercial property market, according recent minutes from its financial markets watchdog.
The minutes from last month’s meeting of the Financial Policy Committee (FPC) showed that Bank policymakers noted “signs of relaxation” in underwriting standards for commercial property loans.
The FPC monitors threats to the stability of the country’s financial system. It reports that total commercial real estate transactions totaled close to £55 billion last year. This figure was just short of the peak hit before the financial crisis.
Most of the deals were financed without buyers taking on large debts. According to one estimate, 75 per cent of transactions in 2013 were completed using equity only. In 2007, only 25 per cent of purchases were financed in this manner.
The relaxation in lending standards comes after several years where commercial property lending was either not available to borrowers or was only offered under strict terms.
The minutes suggest that officials were satisfied that the commercial sector did not pose an immediate risk to the financial system, but indicate that the Bank is keeping a close eye on the property market and is looking for signs of overheating.
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